Chevron

TABLE OF CONTENTS A.

Case abstract ......................................................................................................................................... 2

b.

Vision statement.................................................................................................................................... 3

c.

External audit: ....................................................................................................................................... 4 a. Opportunities ......................................................................................................................................... 4 b. Threats .................................................................................................................................................. 4 c. Factor evaluation (EFE) matrix ............................................................................................................. 4 Internal audit ......................................................................................................................................... 5

d. a.

Strengths ........................................................................................................................................... 5

b. Weaknesses ........................................................................................................................................... 5 c.

Internal factor evaluation (IFE) matrix ............................................................................................. 6 Financial analysis .................................................................................................................................. 8

e. a.

ROE (return on equity) ..................................................................................................................... 8

b.

ROA (return on assets)...................................................................................................................... 8

f.

Swot strategies: ..................................................................................................................................... 9

g.

Grand strategy matrix...................................................................................................................... 11

h.

The internal-external (IE) matrix .................................................................................................... 12

i.

QSPM.................................................................................................................................................. 13

j.

Recommendations ...................................................................................................................................

1

CHEVERON CORPORATION A. Case Abstract Chevron the 3rd position in fortune five hundred companies began with an oil discovery north of Los Angeles in 1879 followed by the formation of the Pacific Coast Oil Company, the oldest predecessor of Chevron Corporation. Standard Oil Company (owned by John D. Rockefeller) subsequently bought Pacific Coast Oil in 1900, and six years later the merged name became Standard Oil Company (California). But in 1911, the Sherman Antitrust Act resulted in the breakup of the parent Standard Oil and created Standard of California as an independent company. After the war ended, the company merged with Pacific Oil Company, becoming Standard Oil Company of California (Socal). In 1930 it made a joint venture with Caltex. By the end of 1930s, the Aramco partnership was formed in the Middle East, composed of Socal, Texaco, Exxon, and Mobil. Following World War II, the additives and petroleum-based chemical invented for the war were quickly turned to peacetime uses. The age of petrochemical had arrived, and with it came Chevron Chemical Company. By 1980, Aramco was entirely owned by Saudis, and in 1988the name was changed to Saudi Arabian Corporation. In 1984, the merger between Standard Oil of California Gulf Oil was the largest merger in history at that time nearly doubling the company's world wide proved oil and gas reserves. This merger, Socal changed its name to Chevron Corporation. Through the purchase of Tenneco Inc.'s U.S. Gulf of Mexico crude oil and natural gas properties in 1988, Chevron became one of the largest gas producers in the United States. Chevron merged with NGC Corporation in the area of natural gas to from Dynegy in 1998. In 1993, Chevron formed Tengizchevroil, a joint venture with the Republic of Kazakhstan, becoming the first major Western oil company to enter newly independent Kazakhstan. In 2001, Chevron acquired Texaco for $37.5 billion and changes its name yet again to Chevron Texaco Corporation. But after sizable amounts on changing the name/logo on everything from letterhead to the credit union's legal name, on May 9, 2005, the name returned to the Chevron. In 2005, Chevron had another name changed opportunity through its acquisition of

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Unocal Corporation. But this time it opted to leave the brand unchanged and reduced confusion. The Unocal acquisition made Chevron the world's largest producer of geothermal energy. Now in present Chevron is the second-largest energy company in the United States and among the largest corporations in the world, based on market capitalization as of December 31, 2008. Headquartered in San Ramon, California, with the stock ticker symbol CVX, it conducts business in more than 100 countries. Chevron engages in every aspects of the crudes oil and natural gas industry, including exploration and production, manufacturing, marketing and transportation, chemicals manufacturing and sales, geothermal, power generation and renewable. Its global workforce consisted of 66,000 employees at year-end 2008. In 2008, Chevron produced 2.53 million barrels of net oil-equivalent per day. About 75 percent of that volume occurred outside the United States in more than 20 different countries. Chevron had a global refining capacity of more than 2 MM barrels of oil per day at the end of 2008 and invested $22.8 billion in capital projects last year. The marketing network supports more than 25,000 retail outlets on six continents, with investment in 13 power-generating facilities in the United States and Asia. Of the 10,000 retail outlets in the United States Chevron has had 21 consecutive annual increases in dividends, with dividends growing at an average annual rate of 12 percent over the 5 past years. The growth rate is 7 percent for the last 21 years. At the end of March 2009, the dividend yield was about 4 percent. Over the last five years, cash returned to the stockholders has totaled more than $46 billion, $ 25 billion in share buybacks and over $21 MM in dividends. In March 2009, Chevron was presented with the HART Energy Publishing Refiner of the year award, which is based on achievements in the following categories: cleaner environment, investment and corporate growth and lastly vision.

B. Vision Statement “To be the global energy company most admired for its people, partnership and performance.”

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C.

External Audit: a. Opportunities



Marketing development by starting operating in untapped countries.



Market penetration to increase market share in developing countries(Pakistan, India)



Increase in CNG usage



Increasing demand for liquefies natural gas.



Capital investment



Bio fuels initiatives

b. Threats 

Political threat



Risk associated with conducting business outside U.S like WTO regulations risk



Economic or industry downturn.



Environmental regulation



Tax regulation in the U.S



Competitor (ExxonMobil, ConocoPhillips, Shell, British Petroleum)

c. Factor Evaluation (EFE) Matrix Opportunities

Weight

Rating

Weighted score

1. Marketing development by starting 0.1

3

0.3

in developing countries(Pakistan, India)

0.08

3

0.24

3. Increase in CNG usage

0.07

2

0.14

4. Increasing demand for liquefies natural gas.

0.07

2

0.14

5. Capital investment

0.05

3

0.15

6. Bio fuels initiatives

0.1

4

0.4

operating in untapped countries. 2. Market penetration to increase market share

4

Threats

Weight

Rating

Weighted score

0.04

2

0.08

outside U.S like WTO regulations risk

0.06

3

0.18

3. Economic or industry downturn.

0.15

5

0.75

4. Environmental regulation

0.05

2

0.1

5. Tax regulation in the U.S

0.03

3

0.09

0.2

3

0.6

1. Political threat 2. Risk associated with conducting business

6. Competitor (ExxonMobil, ConocoPhillips, Shell, British Petroleum) Total

1

3.17

D. Internal Audit

a. Strengths 

Strong brand portfolio



World’s largest producer of geothermal energy.



Second largest integrated energy company.



Business in more than 100 countries, having 66,000 employees.



Global refining capacity of more than 2 MM barrels of oil per day.



Negative debt position.



No one gasoline brand in united states for the consecutive 5th year



Number one convenience store brand.



Chevron was presented with a HART energy publishing refiner of the year award.

b. Weaknesses 

Out of the 10,000 outlets in the United States, chevron only owns hundreds till 2008.



Reduction in profits. 5



Chevron’s total revenues fell 51% to $40 billion from $81billion a year ago.



Stopped drilling new gas wells due to loss



Stopped buy back its own stocks due to loss

c. Internal Factor Evaluation (IFE) Matrix Strengths

Weight

Rating

Weighted score

0.1

5

0.5

energy.

0.15

5

0.75

3. Second largest integrated energy company.

0.1

4

0.4

0.05

4

0.2

MM barrels oil per day.

0.05

3

0.15

6. Negative debt position.

0.05

3

0.15

from last five years.

0.05

2

0.1

8. Number one convenience store brand

0.07

4

0.28

0.05

4

0.2

1. Strong brand portfolio 2. World's largest Producer of geothermal

4. Business in more than 100 countries having 66,000 employees. 5. Global refining capacity of more than 2

7. Number one gasoline brand in united state

9. Chevron was presented with a HART energy publishing refiner of the year award

6

Weaknesses

Weight

Rating

Weighted score

1. Out of the 10,000 outlets in the united states, chevron only owns hundreds till 2008.

0.05

2

0.1

2. Reduction in profits.

0.07

3

0.21

0.08

3

0.24

0.06

2

0.12

5. Stopped buy back its own stocks due to loss

0.07

2

0.14

Total

1

3. Chevron’s total revenues fell 51% to $40 billion from $81billion a year ago. 4. Stopped drilling new gas wells due to loss

7

3.54

E. FINANCIAL ANALYSIS a. ROE (Return on Equity)

Net Income Shareholder’s Equity ROE

2006

2007

2008

17,138,000

18,688,000

23,931,000

68,935,000

77,088,000

86,648,000

0.25

0.24

0.28

b. ROA (Return on Assets)

Net Income Total Assets ROA

2006

2007

2008

17,138,000

18,688,000

23,931,000

132,628,000

148,786,000

161,165,000

0.13

0.13

0.15

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F. SWOT STRATEGIES: Strengths 1. Strong brand portfolio.

Weaknesses 1. Out of the 10,000 outlets in

2. World's largest Producer of the united states, chevron only geothermal energy.

owns hundreds till 2008.

3. Second largest integrated 2. Reduction in profits. 3. Chevron’s total revenues

energy company.

4. More than 100 countries fell 51% to $40 billion from having 66,000 employees.

$81billion a year ago.

5. Global refining capacity of 4. Refining and marketing more than 2 MM barrels oil operations per day.

$95million

6. Negative debt position.

quarter.

actually in

the

lost second

7. Number one gasoline brand 5. Declining oil and gas in united state from last five reserves years. 8. Number one convenience store brand. 9. Chevron was presented with a HART energy publishing refiner of the year award.

Opportunities

S-O Strategies

1. Marketing

1. Company should focus

development

by

on

unexplored

.W-O Strategies 1. By going unexplored countries,

company

starting operating in

countries, which can

can increase its profit

untapped countries.

provide a good market,

and

2. Market penetration to

as they have good

W3, O1, O2)

increase market share

brand image, financial

in

position. (S1, S2, S3,

development

O1)

penetration

developing

countries(Pakistan,

9

revenues.

2. By

(W2,

Market and company

India)

2. As

is

can increase its outlets

3. Increase in CNG usage

considered as cheap

which ultimately leads

4. Increasing demand for

fuel,

to

liquefies natural gas.

CNG

sector

so

company

increase

revenue

should take a step for

and profits. (W1, W2,

5. Capital investment

this side (S1, S2, S3,

W3, O1, O2, O6)

6. Bio fuels initiatives

O3) 3. Company should take more interest to Bio fuel line by using its team,

finance,

strong

brand

and image

(S1, S2, S3, O4, O6)

Threats

1. By good brand image and 1. by exploring the new

1. Political threat 2.

Risk

associated

with market

conducting business outside company U.S like WTO regulations risk 3.

Economic

W-T Strategies

S-T Strategies

or

position and can

team markets,

company

can

reduce

the increase its revenue and profit possible political impact on it. which can reduce political

industry (S1, S2, S3, S4, T1)

downturn.

2. Company can compete

4. Environmental regulation

more, as it has a good brand

5. Tax regulation in the U.S

image, good financial health.

6. Competitor (ExxonMobil, (S1, S2, S3, S4, S6, S7, T6) ConocoPhillips, Shell, British Petroleum)

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threat compete well. (W2, W3, T1, T6)

G. Grand Strategy Matrix

Quadrant II

Rapid Market Growth

Quadrant I

Strong Competitive Position

Weak Competitive

Position

Quadrant III

Slow market growth

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Quadrant IV

H. The Internal-External (IE) Matrix

The IFE total weighted score

High

Strong

Average

Weak

3.0 to 4.0

2.0 to 2.99

1.0 to 1.99

I

II

III

IV

V

VI

VII

VIII

IX

3.0 to 3.99 CHEVRON Corporation Medium The EFE

2.00 to 2.99

Total weighted score

Low 1.00 to 1.99

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I. QSPM Company should Company should focus

on take more interest

unexplored

to Bio fuel line by

countries, which using its team, can

provide

a finance, and

good market, as strong brand they have good image. brand

image,

financial position.

Key Factors

Weight AS

TAS

AS

TAS

4

0.4

3

0.3

4

0.32

2

0.16

Opportunities 1. Marketing development by starting operating 0.1

in untapped countries. 2. Market penetration to increase market share in developing countries(Pakistan, India)

0.08

3. Increase in CNG usage

0.07

-

-

1

0.07

4.Increasing demand for liquefies natural gas.

0.07

-

-

2

0.14

5. Capital investment

0.05

2

0.1

-

-

6. Bio fuels initiatives

0.1

-

-

2

0.2

0.04

3

0.12

2

0.08

2

0.12

1

0.06

Threats 1. Political threat 2.Risk associated with conducting business outside U.S like WTO regulations risk

0.06

3.Economic or industry downturn.

0.15

3

0.45

3

0.45

4.Environmental regulation

0.05

-

-

-

-

5.Tax regulation in the U.S

0.03

-

-

-

-

0.2

3

0.6

3

0.6

6.Competitor

(ExxonMobil,

ConocoPhillips, 13

Shell, British Petroleum)

Total

1

Strengths 0.1

1. Strong brand portfolio 2. World's largest Producer of geothermal energy.

0.15

3. Second largest integrated energy company.

0.1

4. More than 100 countries having 66,000

4

0.4

3

0.3

4

0.6

3

0.45

3

0.3

2

0.2

2

0.1

2

0.1

1

0.05

1

0.05

-

-

-

-

1

0.05

1

0.05

1

0.07

1

0.07

2

0.1

1

0.05

3

0.15

2

0.1

1

0.07

1

0.07

1

0.08

1

0.08

0.05

employees. 5. Global refining capacity of more than 2 MM barrels oil per day.

0.05

6. Negative debt position.

0.05

7. Number one gasoline brand in united state from last five years.

0.05

8. Number one convenience store brand

0.07

9. Chevron was presented with a HART energy 0.05

publishing refiner of the year award

Weaknesses 1. Out of the 10,000 outlets in the united states, chevron only owns hundreds till 2008.

0.05

2. Reduction in profits.

0.07

3. Chevron’s total revenues fell 51% to $40 billion from $81billion a year ago.

0.08

4. Stopped drilling new gas wells due to loss

0.06

2

0.12

1

0.06

5. Stopped buy back its own stocks due to loss

0.07

1

0.07

1

0.07

1

-

4.27

-

3.71

Total

14

J. Recommendations 

Company should search and explore untapped countries which will rise company’s growth



As Iraq is a good opportunity for oil reserve leasing, so company should focus on that, it will reduce the risk of declining oil reserves



Company should invest in energy technologies, it will give a new market as this is going be a popular source of energy



Company should look on “Bio fuel” as it is cheaper one source of fuel.



As demand of liquefies natural gas is increasing, so company should focus on that area, it will give a big rise to company.

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